Output-based regulation

Fields of innovation for energy-grid operators?

The regulatory environment in Europe is pushing network utilities to face new challenges that will heavily impact their operations. Regulators all over Europe are watching the tariff mechanism introduced in Great Britain, named RIIO, which is based on incentives, with interest. Many have plans to introduce similar output-based methodologies already under way.

Aside from output-based regulation, an innovative methodology for grid operators to evaluate projects is cost-benefit analysis (CBA). CBA differs from traditional approaches, such as DCF and others based only on the financial perspective, as it considers and estimates a larger amount of costs and benefits originating from projects. Examples include economic, environmental and welfare effects with direct and indirect impact on stakeholders.

Given a new regulation that presses network operators to deliver sustainable outcomes, new challenges arise, and network operators will face this huge cultural and operational shift and need to rethink their business models. In the new scenario, in which innovation also plays a strategic role in success, Arthur D.

Little helps companies using digital competences and solutions that ensure greater control of data flows, enable exploiting of all informative potential in asset management, and overcome limits of infrastructural assets typical of network utilities.